P.G. County town says it could go bankrupt

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A Prince George’s County town could face bankruptcy, according to a state review of local government audits.

Fairmount Heights, a town of about 1,500 people just east of Washington, reported a general fund deficit of about $53,000 in fiscal year 2010, the most recent year for which the town provided a self-audit to the Office of Legislative Audits in the state Department of Legislative Services.

The deficit actually shrank by $1,000 compared to a fiscal 2009 audit. But the auditor still told the state that “the town’s delinquency in making certain payments raised substantial doubt about its ability to continue as a going concern.”

Fairmount Heights Mayor Lillie Thompson-Martin, serving her second term after being mayor from 2003 to 2007, said the town had changed its financial fortunes, and fiscal 2011 and 2012 audits would show “we’re in good financial shape.”

Towson-based Lindsey + Associates LLC is conducting the audits, Thompson-Martin said. A message left at the firm’s office was not immediately returned.

“We’ve been working on these audits for a while,” Thompson-Martin said. “We hope to do 2012 very soon. … They’re coming up to finalization right now. We’ve been in good shape.”

Robert A. Garman, the office’s assistant director, said the General Assembly’s Joint Committee on Management of Public Funds began work before this year’s regular legislative session on regulations to govern municipal bankruptcies, in part because of Fairmount Heights’ predicament.

Garman said he did not know of any Maryland municipality that has gone bankrupt. He said there was no reason for the town to panic — yet.

“The town of Fairmount Heights hasn’t fallen off the face of the Earth or anything,” Garman said.

The tiny town has been in the spotlight for a series of bizarre occurrences in the last several years. In 2009, a former town councilman was charged with impersonating a police officer, but was found not guilty at trial after the jury said there were gaps in a police investigation.

In 1998, then-Mayor Kathleen T. Scott changed the locks at town hall and refused to give keys to council members, according to reports. Residents voted to recall Scott later that year.

Fairmount Heights was one of five local governments that have not provide the Office of Legislative Audits with fiscal year 2011 reports, including Baltimore, Hyattsville, Deer Park and Forest Heights.

Two other local governments reported general fund deficits: Cumberland in Allegany County ($1.6 million) and Ridgely in Caroline County ($95,914).